CURRENT MONTH (March 2018)

Professional Responsibility

Jewel Developments: Dissolved Law Firms’ Claims for Fees

By Keith R. Fisher

On certification from the Ninth Circuit in the Heller Ehrman bankruptcy, the California Supreme Court unanimously held on March 5 that a dissolved law firm has no property interest under California law in hourly basis legal matters and therefore no property interest in the profits generated by its former partners’ work on hourly fee matters pending at the time of the firm’s dissolution. The ruling is a serious setback for bankruptcy trustees claiming entitlement to earnings of successor law firms hired by a dissolved firm’s former clients to complete the unfinished legal work. A similar result was reached by the N.Y. Court of Appeals in 2014 in the Thelen bankruptcy. On February 27, the Ninth Circuit certified a related question to the D.C. Court of Appeals in the Howrey bankruptcy: whether a dissociated partner owes a duty to the former law firm to account for profits earned post-departure on hourly basis legal matters in progress but not completed at the time of the partner’s departure, where those matters were completed at another firm that hired the partner and, if so, whether D.C. law allows the former firm to recover those profits from the new firm on an unjust enrichment theory.

Federal Judge Offers Primer on E-mails and Privilege

By Keith R. Fisher

In ruling on a routine discovery dispute between Sodexho and Drexel University involving a privilege log, a federal judge used the occasion to pen a baker’s dozen of hypotheticals to illustrate the applicability of attorney-client privilege to e-mails. The judge regarded the following three as privileged (legal advice is sought or provided) and exempt from production: 1. President of Food Service Corporation A sends email to General Counsel, “What are the requirements of a binding contract for food service contract with College X?” 2. Counsel emails the President—with a list of the requirements for such a contract. 3. President to Corporation A's VP, who as part of her job is engaged in negotiations with College X, “Our General Counsel has advised me that in order to form a binding contract with College X, we need to agree on requirements 1, 2, and 3.”

But the following three are not privileged: 4. VP to Corporation A's Sales Manager: “President has instructed us to proceed to negotiate a contract for food services with College X. Get to this ASAP.” 5. Sales Manager to VP: “I've just met with Manager of College X and we have a handshake deal. How much detail do we need in the written contract?” 6. VP to President: “Sales Manager reached a great deal for us. Let's keep the written contract simple and direct to close the deal ASAP.” No legal advice is sought or provided in these hypos.